INCOME TAXES

Losses before income taxes and non-controlling interests were as follows:



	Year Ended December 31,
(amounts in millions)	2016			2015			2014
Domestic	$	(229.1	)	$	(290.8	)	$	(103.9	)
Foreign	181.0			61.5			73.0
Total	$	(48.1	)	$	(229.3	)	$	(30.9	)

Income tax expense (benefit) consisted of the following:



	Year Ended December 31,
(amounts in millions)	2016			2015			2014
Current:
U.S.:
Federal	$	0.1		$	0.7		$	(0.6	)
State and local	0.4			(0.2		)	0.4
Foreign	85.5			120.1			36.7
Total current	86.0			120.6			36.5
Deferred:
U.S.:
Federal	1.9			6.4			(18.3		)
State and local	(0.2		)	(5.2		)	0.4
Foreign	(59.1		)	(46.7		)	(25.3		)
Total deferred	(57.4		)	(45.5		)	(43.2		)
Income tax expense (benefit)	$	28.6		$	75.1		$	(6.7	)

Income tax expense (benefit) differed from the amounts computed by applying the U.S. Federal statutory tax rates to pre-tax loss, as a result of the following:



	Year Ended December 31,
(amounts in millions)	2016			2015			2014
U.S. federal statutory tax rate	35.0		%	35.0		%	35.0		%
Taxes computed at U.S. statutory rate	$	(16.8	)	$	(80.3	)	$	(10.8	)
State income taxes, net of federal benefit	0.1			(3.6		)	0.8
Foreign tax on foreign operations	(17.2		)	(25.3		)	(12.5		)
U.S. tax on foreign operations	29.0			31.1			4.8
Net change in reserve	(24.1		)	27.5			1.5
Change in valuation allowances	68.4			72.6			0.2
Provision for tax on undistributed foreign earnings	26.8			5.0			(3.7		)
Change of tax rate	11.8			(1.0		)	(0.5		)
Impact of transaction costs	(24.5		)	40.5			6.5
Purchase price contingency	1.3			0.4			6.6
Settlement of Series B Convertible Preferred Stock	(34.3		)	—			—
Goodwill impairment	6.2			—			—
Other, net	1.9			8.2			0.4
Income tax expense (benefit)	$	28.6		$	75.1		$	(6.7	)
Effective tax rate	(59.5		)%	(32.8		)%	21.7		%

As of December 31, 2015, the Company had approximately $390 million of indefinitely reinvested foreign earnings for which no U.S. income tax or foreign tax had been provided. During the fourth quarter of 2016, the Company changed its intent with regard to the indefinitely reinvested foreign earnings of certain of its foreign subsidiaries. The change was prompted by several factors including a decision to improve the Company’s overall adjusted EBITDA/debt ratio, the term loan refinancing completed in October and December 2016 - whereby the Company was able to move a portion of its debt from the United States to Europe - and the resulting need to access foreign cash to fund the related interest expense. In connection with this change, the Company has provided U.S. income tax and foreign taxes on previously unremitted earnings of certain foreign subsidiaries from 2015 and for other foreign subsidiaries for 2016. The amount of deferred taxes recorded in the fourth quarter of 2016 is $29.7 million. Of this amount, $4.8 million relates to the taxes that would be incurred upon repatriation of earnings from non-U.S. subsidiaries to the U.S. The balance of $24.9 million relates to taxes including withholding taxes upon distribution of earnings from non-U.S. subsidiaries to certain foreign holding companies. The remaining approximately $337 million of undistributed foreign earnings is indefinitely reinvested in the Company’s foreign subsidiaries for which it is impracticable to determine the impact of U.S. income or applicable foreign taxes that would be payable if such earnings were repatriated to the United States.

The components of deferred income taxes at December 31, 2016 and 2015 were as follows:



	December 31,
(amounts in millions)	2016			2015
Deferred tax assets:
Accounts receivable	$	10.4		$	8.9
Inventory	9.3			6.6
Accrued liabilities	45.6			34.8
Employee benefits	43.6			27.5
Research and development costs	15.2			11.8
Tax credits	46.2			49.3
Net operating losses	359.7			332.3
Goodwill	16.4			26.8
Financing activities	4.5			30.7
Other	39.0			41.4
Total deferred tax assets	589.9			570.1
Valuation allowance	(363.2		)	(303.8		)
Total gross deferred tax assets	226.7			266.3
Deferred tax liabilities:
Plant and equipment	37.0			38.6
Intangibles	796.9			867.1
Undistributed foreign earnings	36.8			7.1
Other	0.4			2.9
Total gross deferred tax liabilities	871.1			915.7
Net deferred tax liability	$	644.4		$	649.4

Deferred tax assets are included in "Other assets" on the Consolidated Balance Sheets as of December 31, 2016 and 2015.

The above table reflects the correction of an immaterial prior year error which overstated the valuation allowance and understated deferred tax liabilities related to intangible assets by $99.8 million. There was no impact to net deferred tax liabilities.

Valuation allowances reflect the Company's assessment that it is more likely than not that certain federal, state and foreign deferred tax assets, primarily net operating losses, will not be realized. The assessment of the need for a valuation allowance requires management to make estimates and assumptions about future earnings, reversal of existing temporary differences and available tax planning strategies. If actual experience differs from these estimates and assumptions, the recorded deferred tax asset may not be fully realized, resulting in an increase to income tax expense in Platform's results of operations. The valuation allowance for deferred tax assets was $363 million and $304 million at December 31, 2016 and 2015, respectively. During 2016, the valuation allowance increased by $59.4 million as a result of $68.4 million of new reserves, offset in part by net reserve deductions and other adjustments of $9.0 million. During 2015, the valuation allowance increased by $284 million as a result of $72.6 million of new reserves and $212 million other adjustments, including the correction noted above, and net deductions from the reserve.

At December 31, 2016, the Company had federal, state and foreign net operating loss carry-forwards of approximately $380 million, $777 million and $697 million, respectively. The U.S. federal net operating loss carry-forwards expire between the years 2021 and 2036. The U.S. federal net operating loss carry-forwards result in a deferred tax asset of $133 million. The majority of the state net operating loss carry-forwards expire between the years 2017 and 2036. The state net operating loss carry-forwards result in a deferred tax asset of $37.7 million. Due to the historic and projected domestic losses, the Company has recorded a full valuation allowance against its U.S. federal and state net deferred tax assets exclusive of the indefinite lived assets. The foreign tax net operating loss carry-forwards expire between the years 2017 through 2036, with some being unlimited in utilization. This results in a deferred tax asset of $189 million. A valuation allowance of $161 million has been provided against the deferred tax assets associated with certain foreign net operating loss carry-forwards because the recent results of the business units associated with the loss carry-forwards indicate that it is more likely than not that the benefits from the net operating loss carry-forwards will not be fully realized.

Section 382 of the Internal Revenue Code, or the Code, imposes an annual limitation on the amount of a corporation's U.S. federal taxable income that can be offset by net operating losses, or NOLs, if it experiences an "ownership change" (as defined in the Code). The Company experienced ownership changes in 2013 and 2015 with respect to the acquisition of various companies. Accordingly, the use of the Company's NOLs generated prior to these ownership changes is subject to an annual limitation. If certain changes in the Company's ownership occur prospectively, there could be an additional annual limitation on the amount of utilizable carry-forwards.

In addition, at December 31, 2016, the Company had approximately $24.2 million, $16.7 million, $1.8 million and $3.5 million of foreign tax credits, research and development credits, alternative minimum tax credits and other tax credits, respectively, available for carry-forward. These carry-forward periods range from ten years to an unlimited period of time. As discussed above, a full valuation allowance has been recorded on the Company's U.S. federal and state net deferred tax assets exclusive of indefinite-lived assets.

Tax Uncertainties

The following table summarizes the activity related to the Company’s unrecognized tax benefits:



	Year Ended December 31,
(amounts in millions)	2016			2015			2014
Unrecognized tax benefits at beginning of period	$	112.2		$	27.7		$	25.6
Additions based on current year tax positions	76.2			20.7			1.7
Additions based upon prior year tax positions (including acquired uncertain tax positions)	1.7			72.2			7.4
Reductions due to closed statutes	(9.9		)	(2.9		)	(6.7		)
Reductions for prior period positions	(51.9		)	—			—
Reductions for settlements and payments	—			(5.5		)	(0.3		)
Total unrecognized tax benefits at end of period	$	128.3		$	112.2		$	27.7

As of December 31, 2016, the Company had $128 million of total unrecognized tax benefits, of which $40.1 million, if recognized, would impact the Company’s effective tax rate. The additions in the current year are primarily related to positions regarding acquisitions. The Company was also able to reduce the amount of unrecognized tax benefits in the fourth quarter based on a reassessment of the uncertainty for a previously identified position. Due to expected settlements and statute of limitations expirations, the Company estimates that $11.4 million of the total unrecognized benefits will reverse within the next twelve months.

The Company recognizes interest and/or penalties related to income tax matters as part of income tax expense (benefit), which totaled $(5.5) million, $4.9 million and $1.0 million, for the years ended December 31, 2016, 2015, and 2014, respectively. The Company's accrual for interest and penalties totaled $13.3 million and $17.5 million as of December 31, 2016 and 2015, respectively.

As of December 31, 2016, the following tax years remained subject to examination by the major tax jurisdictions indicated below:



Major Jurisdictions	Open Years
Belgium	2009	through current
Brazil	2010	through current
China	2010	through current
France	2010	through current
Japan	2011	through current
Mexico	2011	through current
Netherlands	2012	through current
South Africa	2012	through current
Taiwan	2011	through current
United Kingdom	2009	through current

The Company is subject to taxation in the United States and in various states and foreign jurisdictions. As of December 31, 2016, the Company's tax years for 2013, 2014 and 2015 are subject to examination by the U.S. federal tax authorities. With few exceptions, as of December 31, 2016, the Company was no longer subject to state and local or foreign examinations by tax authorities for years before 2009. The Company is currently undergoing tax examination in several foreign jurisdictions. The Company believes it has appropriately accrued for the expected outcome of uncertain tax matters and believes such liabilities represent a reasonable provision for taxes ultimately expected to be paid. However, the Company's liability may need to be adjusted as new information becomes known and as tax examinations continue to progress.